As the economy recovers from the effects of COVID-19, “financial institutions are in good shape” to continue providing credit to consumers and businesses, amid persistent uncertainty and rising inflation fears, American Bankers Association Chief Economist Sayee Srinivasan said today on a new episode of the Banking with Interest podcast, hosted by Rob Blackwell. He noted that GDP is expected to continue growing, but that getting unemployed workers to return to the workforce would likely continue to be a challenge.
With respect to inflation, Srinivasan noted that “we need to be watchful,” but said he does not anticipate a return to the high levels of inflation seen in previous decades. He noted that the Federal Reserve is carefully monitoring several economic indicators, and that “the hope and expectation is that they manage it.”
Turning to housing, he added that there is a risk that housing prices could fall from their current highs and strain the mortgage markets, but emphasized that he does not anticipate a housing crisis similar to the one that occurred a decade ago. “Financial institutions are better capitalized to absorb shocks” than they were during the Great Recession, he said, adding that “there is [also]better risk management, which means they’re making mortgage loans and making sure the borrower has sufficient capacity to make payments on it.”